The deadline to adopt the Financial Action Task Force's crypto directives is approaching quickly. The directives, meant to combat terrorist financing and money laundering, are imposing existing banking policy on the cryptocurrency industry. One notable directive, called the travel rule, is that wallet providers and exchanges will have to disclose the disclose the sender’s and recipient’s data when assisting with an exchange of $1,000 or higher. The are also guidelines for initial coin offerings (ICOs).
Customer data may include more than the sender’s and recipient’s name and addresses according to line 99 of the directive. Due diligence measures could include a customer's IP address, physical address, national identity number and information from third-parties. The directives also suggest crypto firms keep records for five years, specifically stating distributed ledger information isn't sufficient.
FATF has 37 members who have five months left to adopt the guidelines, but countries are not legally obligated to do so. If all 37 members, the G7 industrial powers, adopt the directives, it would eliminate the patchwork of regulations in different countries. It may also force some smaller crypto firms out of business as complying with the directive could be costly. Crypto industry players who could afford to may simply move operations to friendlier jurisdictions. A number of business have sprung up offering compliance solutions, such as Bitcoin Suisse’s OpenVASP and Netki. VASPS are Virtual Asset Service Providers, such as wallets and exchanges. Four VASPs in Switzerland are working on an open source solution so VASPs can comply with the directive.
FATF's crypto directives could encourage more institutional investment. A lack of clear regulations hinders investment, however, standardized oversight could help eliminate institutional fears. The directives could also encourage investment by individuals who have shied away after hearing about illegal activity and hacks.